VZCZCXYZ0000
PP RUEHWEB

DE RUEHGE #0367/01 1911415
ZNY CCCCC ZZH
P 101415Z JUL 09
FM AMEMBASSY GEORGETOWN
TO SECSTATE WASHDC PRIORITY 7323

C O N F I D E N T I A L GEORGETOWN 000367 
 
INFO EC CARICOM COLLECTIVE PRIORITY 
DEPT OF COMMERCE WASHINGTON DC PRIORITY 
DEPT OF AGRICULTURE WASHINGTON DC PRIORITY 
DEPT OF ENERGY WASHINGTON DC PRIORITY 
 
SIPDIS 
 
STATE FOR OES 
BRASILIA FOR ESTH OFFICER 
 
E.O. 12958: DECL: 07/08/2019 
TAGS: CARICOM EAGR ECON ENRG
SUBJECT: GUYANA'S GREAT CARBON-BASED HOPE 
 
REF: A. GEORGETOWN 364 
     ¶B. EMAIL: BAKEWELLRA TO SES-CR 
 
Classified By: Charge d'Affaires, a.i. Karen L. Williams for reasons 1. 
4(b) and (d) 
 
¶1. (C) SUMMARY: President Jagdeo recently launched a Low 
Carbon Development Strategy (LCDS) which he hopes will 
transform Guyana,s economy, conserve its forests and 
contribute to the global effort of reducing climate-changing 
carbon emissions.  The strategy,s feasibility hinges on UN 
climate negotiations (slated for December in Copenhagen) 
yielding a global agreement on a carbon market.  Contacts 
throughout Guyana,s diplomatic, development and conservation 
communities express near uniform concern with the strategy,s 
financial projections, proposed governance and treatment of 
stakeholders, as well as the GoG,s capacity to execute.  The 
term-limited Jagdeo sees the LCDS as his legacy and will push 
this strategy at all opportunities.  END SUMMARY. 
 
LCDS IN A NUTSHELL 
------------------ 
2.(U) Guyana,s LCDS is a plan to channel forest conservation 
payments into human capital development and strategic 
investments in low-carbon economic sectors like business 
process outsourcing, hydropower, aquaculture and other 
high-value, export-oriented agriculture.  The LCDS was 
drafted by the GoG with support from McKinsey & Company and 
the Clinton Foundation.  It argues that since Guyana,s most 
&economically rational8 use of its forests is to clear cut 
them, mine underlying minerals and develop agriculture, 
abstaining from these actions requires compensation at least 
as remunerative.  A previous GoG-sponsored McKinsey & Company 
study estimates the &economic value to the nation8 (EVN) of 
this &economically rational8 development at approximately 
US580 million per annum over 60 years.  The LCDS projects 
payments from donor countries, combined with income from an 
eventual carbon market mechanism, compensating the country at 
and eventually above the EVN over coming decades.  Full text 
of the LCDS is available at www.lcds.gov.gy. 
3.(U) While the Kyoto Protocol,s Clean Development Mechanism 
provides a means for developed countries to fund 
reforestation projects in developing countries, no provision 
exists to incent conservation of standing forests.  A 
proposed solution to this problem is REDD ) Reducing 
Emissions from Deforestation and Forest Degradation.  REDD 
seeks to compensate developing forested countries for the 
market value of climate stabilizing services their forests 
provide.  It is the core payment mechanism the GoG envisions 
for making the LCDS work. 
 
LCDS FINANCING & SPENDING 
------------------------- 
4.(SBU) The GoG projects that payments of hundreds of 
millions of USD per annum from donor countries, combined with 
increasingly greater income from a REDD market mechanism, 
will by 2020 yield Guyana the EVN, US580 million annually. 
Contacts expressed uniform opinion that the EVN is 
unrealistically high, probably an &opening bid8 by the GoG 
in hopes of maximizing transitional payments from donor 
countries.  Many contacts also noted that if Guyana had the 
ability to earn hundreds of millions of USD per annum through 
its timber and mining industries, it would already have done 
so. 
 
5.(SBU) The GoG expects the Government of Norway (GoN) to 
make transitional payments up to US60 million through its 
International Climate and Forest Initiative (ICFI) to 
jumpstart the LCDS, but the GoN has not committed any amount. 
 Regarding specific investment plans envisioned by the LCDS, 
Post notes that contacts widely criticize the choice of a 
hydroelectric station at Amalia Falls as a GoG priority. 
Contacts believe a simpler, more rapidly deliverable 
renewable energy project, such as a photovoltaic array or a 
wind turbine farm near Georgetown, would serve Guyana better, 
particularly in building the confidence of donors and REDD 
market participants in the GoG,s capacity to execute 
low-carbon investments. 
 
CONSULTATIVE PROCESS & AMERINDIAN PARTICIPATION 
--------------------------------------------- -- 
6.(SBU) The GoG has initiated a three-month consultative 
process that seeks to win the support of Amerindian 
communities, the forestry and mining industries, conservation 
organizations and other effected stakeholders.  Cracks are 
already appearing in the GoG,s poorly laid foundation for 
this consultative process.  A contact who recently 
participated in three consultative meetings in Amerindian 
communities reports there was widespread misunderstanding 
about the LCDS and some fear about potential loss of rights 
among indigenous groups; both the misunderstanding and the 
fear were unresolved by the consultative meetings.  The 
strategy,s greatest threat is failing to integrate the 
forestry and mining concessionaires, since their lack of 
participation would result in more deforestation rather than 
less.  Potential international donors like the World Bank and 
GON stress that a fair consultative process with Amerindian 
communities is a non-negotiable precondition of their 
participation. 
 
7.(SBU) The LCDS features an &opt-in8 for Amerindian 
communities wishing to participate in the REDD mechanism.  A 
contact with significant experience with local indigenous 
groups warns that this opt-in appears to defer to Amerindian 
sovereignty, but is risky for two reasons.  First, since 
approximately 20 percent of Guyana,s forested lands are 
Amerindian territory, the LCDS,s actual effectiveness would 
be compromised by excluding Amerindian forests.  Second, any 
forested land outside of the REDD mechanism would be 
susceptible to &leakage8, whereby unlicensed logging 
operators seek out unprotected timber and secure its harvest 
through informal deals with local tribal leaders. 
 
INTERNATIONAL PERSPECTIVE 
------------------------- 
8.(SBU) Contacts having experience with REDD issues believe 
that a confluence of events and circumstances elevates 
Guyana,s REDD-focused LCDS among the international 
community,s best options for establishing a working model of 
forest conservation countering climate change:  Guyana,s 
proportionally large forest estate; its low rate of 
deforestation; its relatively uncomplicated domestic 
political environment; Jagdeo,s demonstrated commitment to 
REDD and LCDS; the widespread local perception that climate 
change is a threat due to the country,s low-lying coastal 
population; and GON,s apparent determination to deliver a 
functioning REDD project at Copenhagen. 
 
9.(C) Contacts in Guyana's conservation, development and 
diplomatic communities shared near unanimous skepticism about 
Jagdeo's commitment to a fair consultative process; many 
opined that it is only cosmetic, a hallmark of Jagdeo,s 
approach to appeasing donor concerns.  These same contacts 
expressed concern about LCDS governance and the GoG's 
capacity to execute this ambitious strategy.  There is near 
consensus among contacts that the proposed bureaucratic 
structure, which consists of three new agencies answerable 
only to the President, is typical of Jagdeo,s tendency to 
centralize operational and budgetary decision-making.  Many 
contacts expect Jagdeo to talk the talk about independent 
financial oversight, but resist a genuinely independent 
financing authority. All contacts believe it will strain the 
GOG,s already limited capacity to execute complex projects. 
The GoN perceives &huge capacity problems8 in the GoG, as 
well as an apparent lack of political will to undertake 
necessary reforms and accept donor conditionalities and 
advice.  Post shares each of these concerns. 
 
COMMENT 
------- 
10.(C)  From a domestic political perspective, Jagdeo is 
angling to make the LCDS his signature issue and legacy -- 
all climate negotiations involving Guyana will feature this 
strategy.  The LCDS presents opportunities for expanding U.S. 
investment in high-value agricultural products, renewable 
energy technologies, telelcommunications and business process 
outsourcing.  Should the U.S. decide to become involved in 
the LCDS, firm conditionalities ensuring transparency and 
accountability in financial management and project execution 
would be imperative.  END COMMENT 
 
Williams